Benchmark crude oil prices may post their third consecutive week of declines as credit markets continue to punish debt-laden sovereigns in Europe, and even the stronger economies like Germany and France, as contagion fears spread, CNBC's weekly survey showed.
Four of the week's sample group of seven respondents said prices would fall this week while three said they would rise. Last week's poll was split over the direction prices would take.
U.S. crude futures , traded on the New York Mercantile Exchange, rose 60 cents, or 0.62 percent to settle at $96.77 a barrel on Friday, having traded from $94.99 to $97.55. For the week, front-month crude posted a 64-cent loss. ICE Brent January crude fell $1.38, or 1.28 percent, to settle at $106.40 a barrel, posting a 1 percent weekly loss, Reuters reported.
"For the most part everything is trading together. The more the EU, ECB, and IMF do to bolster the eurozone the better it will be for equity markets and oil," said Matt Grossman, Chief Equity Market Strategist for the Adam Mesh Trading Group. "The less they do, and the higher the yields rise on the sovereign debt, the lower the equity market and oil are headed. The question really is - are bond yields going to continue to rise next week?"
Despite the seemingly ever-present gloom seeping out from Europe, there are tentative signs that the U.S. economy is staging a rebound despite unresolved questions over deficit reduction.
U.S. retailers rang up $11.4 billion on the Thanksgiving holiday weekend as shoppers took advantage of deep pre-Christmas discounts. That's up 6.6 per cent compared to last year - a new record, according to Chicago-based research firm ShopperTrak.
PFGBest's Tom Weber said if the U.S. put out a weak Black Friday sales number, the risk would be for downside across asset classes and markets. Though the U.S. consumer's resilience in the face of growth concerns may prove supportive, "Eurozone fears should be the main driver," Weber added. "Expect the rush to liquidity to override any bullish factors."
Such bullish factors may include geo-political concerns focused on Iran and the threat of sanctions levied on the OPEC member's oil exports. In the short term the risk of a strike against Iran or an oil embargo "adds a risk premium to the oil price," said Michael Langford, Proprietary Trader at Streamtrading.com. " However, this is already factored into the price."
Last year Iran exported roughly 2.2 million barrels a day, mostly to China, Europe, India and South Korea, Langford noted.
As a group though, the European Union is the second largest importer of Iranian oil, buying an average of 450,000 barrels a day in the first half of the year, he said. "France who is pushing for a European embargo on oil from Iran, imported an average of 49,000 b/d from January to June from Iran, compared with 183,000 b/d for Italy and 137,000 b/d for Spain. But the move is likely to face strong resistance from Italy and Spain, the two largest buyers of Iranian crude in Europe."
From a technical perspective, Sandy Jadeja, Chief Technical Analyst at City Index said he expected oil to consolidate this week and is bullish heading into 2012, predicting U.S. crude futures could challenge $120 a barrel.